ASOS reports 89% plunge in profits as UK economy declines

Clothng brand Asos

Online fashion brand ASOS today reported a staggering 89% fall in its full year profits and said it expects a loss in the first half of the next year.

The plunging profits come as the UK economy lunges from the cost of living crisis to an energy price crisis and increasingly worrying rising interest rate trend.

ASOS and the economy

ASOS made a pre-tax loss of £31.9 million for the year, compared with a £177m profit the previous year.

José Antonio Ramos Calamonte, Chief Executive Officer said: “ASOS is a strong business with a compelling brand, customer offer and fashion credibility, with dedicated and passionate employees.

“Against the backdrop of an incredibly challenging economic environment, this unique combination has enabled our business to deliver a resilient performance this financial year in the UK – but I know we as a company can achieve far more.

“Today, I have set out a clear change agenda to strengthen ASOS over the next 12 months and reorient our business towards the future.”

“This includes a number of decisive, short-term operational measures to simplify the business, alongside steps to unlock longer-term sustainable growth by improving our speed to market, reinforcing our focus on fashion, strengthening our top team and leveraging data and digital developments to better engage customers.”

“On the basis of the actions I have set out today, the team and I will work resolutely to emerge from these turbulent times as a more resilient and agile business – all the time guided by our purpose, to give our customers the confidence to be whoever they want to be.”

ASOS also said in its results statement that it has historically underinvested in marketing relative to peers with allocation across markets not effectively prioritised or managed effectively to ensure a return on investment; and more than 80% of marketing investment focused on performance marketing, leaving insufficient spend focused on driving longer-term brand awareness. 

“As a result of this, customer acquisition has slowed in FY22, whilst the cost to acquire a new customer has increased”, it said. 

“We have also become increasingly reliant on the use of markdown and promotions as a tool to attract customers, resulting in reduced newness for customers which has contributed to the erosion of gross margin in recent years.”

“The implementation of the new commercial model and structure will enable ASOS to operate a shorter buying cycle, enhancing speed to market and improving curation, and result in a change in stockholding requirements going forward.”

ASOS shares have fallen 77% since the start of the year, although they have risen more than 8% today on the London Stock Exchange following the full year results statement, which likely means investors viewed the company’s performance as not as bad as they were expecting.

Earlier this week it was reported that the company was in refinancing talks with bankers.

ASOS is among those companies branded ‘pandemic winners’ as it made huge profits when consumers turned to online shopping in droves as a result of the global lockdowns.